South Dakota LLC Taxes: The Complete Filing Guide (2025)
Running a limited liability company (LLC) in South Dakota means dealing with taxes at federal, state, and sometimes local levels. This guide simplifies everything you need to know to stay compliant and avoid surprises, from income tax and sales tax to city-specific requirements.
Recommended: Schedule a free consultation with 1-800Accountant to stay on top of your taxes.

South Dakota LLC Tax Basics
Navigating your South Dakota LLC tax obligations doesn’t have to be complicated. We’ll walk you through the essentials of pass-through taxation, explain South Dakota’s specific requirements, and highlight strategies to stay compliant and organized. This guide covers everything from federal income taxes to city-specific requirements and filing deadlines.
Use the links below to jump directly to the section you need:
- South Dakota LLC Taxes at a Glance
- Understanding LLC Taxation Basics
- Federal Tax Obligations
- South Dakota State Taxes
- Local Tax Considerations
- Tax Calendar and Filing Tips
- Tax Strategies for South Dakota LLCs
- Forms and Resources
South Dakota LLC Taxes at a Glance
Tax Type | Rate | Filing Deadline | Forms Required |
---|---|---|---|
Federal Income Tax | 10-37% (personal brackets) | April 15, 2025 | Form 1040 + Schedule C or Schedule E/K-1 |
Self-Employment Tax | 15.3% | April 15, 2025 | Schedule SE |
Federal Payroll Taxes (If Employees) | 7.65% employer + 7.65% employee (FICA) | Quarterly (April 30, July 31, October 31, January 31) | Form 941 |
South Dakota Reemployment Tax (If Employees) | 0%–9.3% (new employer rate: 1.2%) | Quarterly | File online |
Federal Unemployment (FUTA) | 6% on first $7,000 per employee (0.6% after credits) | January 31, 2026 (annual) | Form 940 |
Sales & Use Tax | 4.2% flat rate (plus up to 2% in local sales tax) | Monthly or semiannually | Filed online |
South Dakota Contractor Excise Tax | 2% | Monthly | Filed online |
Municipal Gross Receipts Tax | 1% | Monthly or semiannually | Filed online |
Annual Report | $50 fee | Due by the LLC’s formation anniversary month | Filed online |
Understanding LLC Taxation Basics
How South Dakota LLCs Are Taxed By Default
Your South Dakota LLC doesn’t pay taxes itself. Instead, profits flow through to you and your members, who report them on personal tax returns. This is called pass-through taxation.
Here’s how it works:
- Your LLC earns income from business activities
- The LLC itself files no tax return (unless you elect otherwise)
- Profits “pass through” to members based on ownership percentage
- Each member reports their share on their personal tax return
- Members pay tax at their individual income tax rates
What this means for you: Unlike corporations, your business profits are only taxed once, which typically saves money.
Time-Saving Tip: If you’re uncertain about your LLC’s tax classification, a tax professional can review your LLC’s tax setup in 30 minutes and help you choose the most tax-efficient option.
Tax Classification Options
While pass-through taxation is the default, your South Dakota LLC can choose alternative tax treatments:
Default LLC Tax Status:
- Single-member LLC: Taxed as a sole proprietorship
- Multi-member LLC: Taxed as a partnership
Optional Tax Classifications:
- S Corporation: Can reduce self-employment taxes by paying “reasonable salaries”
- C Corporation: LLC pays corporate tax on profits, members pay personal tax on distributions (creates double taxation)
Not sure which tax classification is right for your business? Schedule a free consultation with 1-800Accountant.
Federal Tax Obligations
Income Tax
As a South Dakota LLC owner, you’ll report your share of business profits on your personal tax return using:
- Form 1040 + Schedule C (single-member LLCs)
- Form 1040 + Schedule E + Schedule K-1 (multi-member LLCs)
Federal income tax rates range from 10% to 37% based on your tax bracket (actual brackets will depend on inflation adjustments and any tax law changes).
Simply Put: Whatever money your business makes (after expenses) gets added to your personal tax return, just like income from a job.
Self-Employment Tax
LLC members actively involved in the business must pay self-employment tax of 15.3% (covering Social Security and Medicare) on their share of LLC profits.
Key points:
- Applies to net earnings of $400 or more
- Calculated on Schedule SE
- You can deduct 50% of the self-employment tax as an “above-the-line” deduction, which lowers your adjusted gross income
What happens if I miss this payment? The IRS charges penalties of 0.5% per month plus interest. However, first-time mistakes can often qualify for penalty abatement if you have a clean compliance history.
Employment Taxes
If your LLC has employees, you must:
- Withhold federal income tax
- Pay and withhold FICA taxes (7.65% each for employer and employee)
- Pay federal unemployment tax (FUTA)
- File quarterly employment tax returns (Form 941)
- Provide W-2 forms annually
Estimated completion time: 2-3 hours per quarter (significantly less with payroll software or professional help)
Estimated Tax Payments
Because no tax is withheld from your LLC profits, you’ll likely need to make quarterly estimated tax payments using Form 1040-ES. These payments cover both income and self-employment taxes on your share of the business income. Missing deadlines or underpaying can lead to IRS penalties, even if you pay in full later.
Working with an accountant can help ensure accurate calculations, on-time payments, and a smarter overall tax strategy.
Key deadlines:
- April 15
- June 16
- September 15
- January 15
Pro Tip: Set calendar reminders 15 days before each deadline. This gives you time to prepare without the last-minute rush that leads to mistakes.
South Dakota State Taxes
South Dakota Contractor’s Excise Tax
If your South Dakota LLC performs construction or real estate improvement work, you’ll need to:
- Pay 2% tax on gross receipts from each project
- Register with the Department of Revenue before starting work
- File returns monthly through SD EPath
- Payments are due by the 20th of the following month
Sales and Use Tax
If your South Dakota LLC sells physical products or certain services:
- Collect 4.2% sales tax (plus any applicable local surtaxes)
- Register for a sales tax license through the South Dakota Department of Revenue
- File through SD EPath monthly, quarterly, semiannually, or seasonally based on sales volume
- Due dates vary based on your assigned filing frequency
60-Second Check: Do I Need to Collect Sales Tax?
- Do you sell physical products in South Dakota? → If yes, collect tax
- Do you sell digital products? → Generally not taxable
- Do you provide services? → Most services are exempt
- Do you sell online to South Dakota customers? → If yes, collect tax
Services typically exempt from sales tax include:
- Professional services (legal, accounting)
- Personal services (haircuts, fitness training)
- Medical services
Products typically subject to sales tax include:
- Tangible personal property
- Prepared food
- Some digital products
Unemployment Insurance (UI) Tax
If you have employees in South Dakota, you must pay the state’s unemployment insurance tax on employee wages.
- Register through the South Dakota Department of Labor
- Rate is 1.2% for new employers (0%–9.3% after experience rating)
- Applies to the first $15,000 of each employee’s wages
- Due quarterly
Annual Report Filing
While not a tax, your South Dakota LLC must file an annual report to stay in good standing with the state.
- Due by the first day of your LLC’s formation month each year
- $50 filing fee
- File online with the South Dakota Secretary of State
Calendar Alert: Set a reminder to ensure you don’t miss this easy but required filing.
Local Tax Considerations
Local Sales and Gross Receipts Taxes
South Dakota allows municipalities to impose local sales and gross receipts taxes in addition to the state rate.
Cities with local taxes include:
- Sioux Falls (2% local sales tax)
- Rapid City (2% local sales tax + 1% municipal gross receipts tax)
- Deadwood (2% local sales tax + 1% municipal gross receipts tax)
- Mitchell (2% local sales tax)
- Hundreds of other cities across the state
Filing requirements:
- No separate registration or local return
- Report local taxes with state sales tax return through SD EPath
- Due monthly, quarterly, or semiannually based on state-assigned schedule
Property Taxes
If your LLC owns real property in South Dakota:
- Rates vary by locality
- Assessed annually
- May qualify for various exemptions based on business type
- Personal property tax may apply to business equipment
Tax Calendar and Filing Tips
Key Deadlines for South Dakota LLCs
January:
- January 15: Final estimated tax payment for previous year
- January 31: Issue W-2s/1099s to employees/contractors
- January 31: Fourth quarter federal payroll tax payment due
- January 31: South Dakota UI tax due
April:
- April 15: Personal tax returns due
- April 15: Federal income and self-employment tax returns due
- April 15: First quarter estimated tax payment due
- April 30: First quarter federal payroll tax payment due
- April 30: South Dakota UI tax due
June:
- June 16: Second quarter estimated tax due
July:
- July 31: South Dakota UI tax due
- July 31: Second quarter federal payroll tax payment due
September:
- September 15: Third quarter estimated tax payment due
October:
- October 31: South Dakota UI tax due
- October 31: Third quarter federal payroll tax payment due
Record-Keeping Checklist
Keep these records for at least seven years:
- Business income records (invoices, receipts)
- Expense receipts and documentation
- Bank and credit card statements
- Asset purchase and improvement records
- Vehicle mileage logs
- Home office documentation
- Payroll records
- Previous tax returns
Tax Strategies for South Dakota LLCs
S Corporation Election Benefits
Converting your LLC to an S Corporation for tax purposes can save on self-employment taxes:
- File Form 2553 with the IRS
- Pay yourself a “reasonable salary” subject to employment taxes
- Take remaining profits as distributions exempt from self-employment tax
Example: An LLC making $100,000 in profit pays 15.3% self-employment tax on the entire amount. As an S Corp, if $60,000 is a reasonable salary and $40,000 is taken as distributions, only the $60,000 is subject to employment taxes.
Potential Savings: In this example, you’d save about $6,120 in self-employment taxes.
Business Expense Deductions
Common deductions South Dakota LLC owners often overlook:
- Home office deduction
- Business mileage (70¢ per mile for 2025)
- Health insurance premiums
- Retirement plan contributions
- Professional development expenses
- Business meals (50% deductible)
Forms and Resources
Federal Tax Forms
- Schedule C: Profit or Loss From Business (sole proprietors)
- Form 1065: U.S. Return of Partnership Income
- Schedule K-1: Partner’s Share of Income, Deductions, Credits
- Form 1120-S: U.S. Income Tax Return for an S Corporation
- Form 2553: Election by a Small Business Corporation (S Corp)
- Form 8832: Entity Classification Election
South Dakota Tax Filings
- SD EPath: File and pay sales tax, use tax, and contractor’s excise tax
- UI Tax System: File and pay unemployment insurance tax
- Secretary of State Portal: File your LLC’s annual report
Helpful Resources
South Dakota LLC Taxes FAQs
Although there’s no corporate or state income tax in South Dakota, your LLC may still need to pay sales tax, use tax, property tax, and other industry-specific taxes.
Additionally, your LLC is required to pay various federal taxes. Check out our LLC Taxes guide for a closer look at the federal-level business tax requirements that your LLC will likely be privy to.
South Dakota LLC formation primarily involves choosing a unique name and a registered agent, filing your Articles of Organization with the Secretary of State, creating an operating agreement, and getting an EIN from the IRS.
After you’ve formed your LLC, you will need to get a business bank account in order to ensure you maintain your limited liability in law.
To get started, check out our guide on how to start an LLC in South Dakota.
South Dakota is considered a tax-friendly state as it does not impose any state income tax, personal property tax, or inheritance tax. Moreover, the state sales tax rate is relatively low at 4.2%. Although property taxes for real estate are moderate, the overall tax structure is quite favorable for businesses.
No, South Dakota LLC members do not need to file a state tax return, as the state does not have a personal income tax. However, if you own an LLC, you may need to file returns for your federal income taxes, state sales and use taxes, and other business-related taxes.
Need Professional Help? While this guide covers the essentials, tax laws are complex and constantly changing. Schedule a free consultation with 1-800Accountant to ensure your South Dakota LLC remains fully compliant while minimizing your tax burden.